All Forum Posts by: Mike Adams
Mike Adams has started 35 posts and replied 205 times.
Post: Recommendations for new boiler
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @George W.:
Originally posted by @Mike Adams:
Originally posted by @George W.:
Originally posted by @L. Brown:
@George W. I’m not referring to the water heater. I’m using boiler to mean the thing that sends steam to the radiators.
I'd get a old school plumber that's known for working on steam. While 30 years old is not new, it's not that old in terms of boilers. At my old job we worked on steam systems that were so old they were converted from coal to oil to gas and still ran pretty well with no leaks.
Usually what kills a steam boiler is dry firing, running without any water in it and that can be caused by something as simple as a clogged return and low water cut off that isnt functioning right. Other than that theyll fail when they get too much mud/rust in them from never being serviced inside the cast iron sections. Also a clogged chimney will make the iron brittle and break.
The longevity of a steam boiler comes down to who owned it before more than anything. If they never cleaned and serviced the sections than its probably pretty whooped. A good plumber can "flood" a steam boiler and pull off the jacket on the top to tell you if the cast iron is leaking pretty easily. If the cast irons in good shape I'd keep running with it as long as there is no issues with saftey controls.
If it is a hydronic boiler they can last even longer because the operating temp is lower, steam is a harsh environment but if it was properly maintained a 30 year old steam boiler wouldn't intimidate me.
If you do go the replacement route, you should really find someone who's experienced with steam boilers. A lot of plumbers anymore dont know them well it's a dead man's form of heat.
prob. not very efficient either.
Residential steam boilers are 82% efficient on a good day. It's been that way since they started putting damper controllers and electronic ignition on them. Which has been around for longer than 30 years at this point. If you want any more efficiency you'd be better off with hydronic or forced hot air which can get to 98%.
If efficiency is a major concern, a steam experienced plumber will be able to figure out how many sq' of radiation you have and properly size, install and balance it. Alot of the times buildings have way too large of a boiler because the last time they changed it someone put the next size up in to be safe and didnt know any better.
Probably 80% of plumbers that will install a steam boiler dont even pipe the steam headers, equalizer and Hartford loop correctly simply because they dont know any better. Let alone put the right sized air valves in at radiators. Alot of systems out there are grossly inefficient because of inexperienced installers messing around with them.
I'll take your word on that. I've not seen many steam boilers in the areas that we service, so my knowledge on them is limited.
Post: Recommendations for new boiler
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @Josh C.:
@Mike Adams
Thumbtack for a boiler? I’m not in your market so maybe everyone is awesome out there, but in Indianapolis I’d rather ask a stranger off the street to babysit my kids, then someone off these type sites work on a steam boiler. It’s something that needs does well and balanced or your efficiency goes down or might not even work right.
Also, most amateurs would not know how to purchase the correct one. The new one will be likely way smaller with different volume.
If not totally rusted you can probably fix it, as said much better above than me.
There are licensed HVAC and plumbers on Thumbtack. We've found some great HVAC and plumbers on Thumbtack in our region.
Post: Replace refridgerator or repair?
- Port Chester, NY
- Posts 209
- Votes 156
What are your guys thoughts on replacing old, 15 year + appliances rather then repairing them? In NY/NJ/CT, repairmen are pricey, so it seems that for bad burners or leaking and not cooling refrigerators should be replaced rather than "diagnosed" and repaired.
Post: Recommendations for new boiler
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @George W.:
Originally posted by @L. Brown:
@George W. I’m not referring to the water heater. I’m using boiler to mean the thing that sends steam to the radiators.
I'd get a old school plumber that's known for working on steam. While 30 years old is not new, it's not that old in terms of boilers. At my old job we worked on steam systems that were so old they were converted from coal to oil to gas and still ran pretty well with no leaks.
Usually what kills a steam boiler is dry firing, running without any water in it and that can be caused by something as simple as a clogged return and low water cut off that isnt functioning right. Other than that theyll fail when they get too much mud/rust in them from never being serviced inside the cast iron sections. Also a clogged chimney will make the iron brittle and break.
The longevity of a steam boiler comes down to who owned it before more than anything. If they never cleaned and serviced the sections than its probably pretty whooped. A good plumber can "flood" a steam boiler and pull off the jacket on the top to tell you if the cast iron is leaking pretty easily. If the cast irons in good shape I'd keep running with it as long as there is no issues with saftey controls.
If it is a hydronic boiler they can last even longer because the operating temp is lower, steam is a harsh environment but if it was properly maintained a 30 year old steam boiler wouldn't intimidate me.
If you do go the replacement route, you should really find someone who's experienced with steam boilers. A lot of plumbers anymore dont know them well it's a dead man's form of heat.
prob. not very efficient either.
Post: Recommendations for new boiler
- Port Chester, NY
- Posts 209
- Votes 156
Buy the boiler yourself, then go on thumbtack, taskrabbit or yelp to find an installer. Some utility companies offer this service too.
Post: Tax benefits from RE investing in high income earners.
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @Dennis Pressey Jr:
@Jose Contreras
Living Trust. 😎
Certainly an option, but it would need be irrevocable, it's own EIN and banks usually do not like dealing with trusts owning LLCs. It would also have to be a C corp, as s-corps cannot be owned by irrevocable trusts. IRTs are excellent ways to protect assets as well.
Post: Reserves for maintenance & repair
- Port Chester, NY
- Posts 209
- Votes 156
I'd rec. placing 5%-10% of your net earnings every month into savings. I'd also highly recommend getting some large credit line credit cards, personal credit lines and business credit lines from you bank (or banks) to have as additional reserve. Don't go to these clowns advertising her and other places about their ability to get you 250k in credit lines for a 2% fee. They are doing the same thing I am telling you to do, minus any of their BS fees. When I first started out, I applied for several credit cards, then as my balances in my checking accounts grew, the bank offered me credit lines. That's how you do it. Just stay away from Chase.
Post: Tax benefits from RE investing in high income earners.
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @Joe Splitrock:
Originally posted by @Mike Adams:
Originally posted by @Joe Splitrock:
Originally posted by @Mike Adams:
Originally posted by @Greg O'Brien:
@Mike Adams its passive. See IRC 469. The rules are black and white and often “marketed” incorrectly. You can certainly navigate them but there is quite a bit of confusion over the passive activity rules and “working on your rentals.” Simply work on your rentals does not escape 469.
Our CPA firm in White Plains, NY and this is how it has been filed.. active since we manage the property, handle the tenants issues, collect money, do repairs ourself, etc. Again, this is active income, not passive income such as investment income. One would think, a firm with over a dozen CPAs and lawyers would know how to file a tax return for their clients. It would only be passive if a third party management company would be managing the day to day operations. We also have a few dozen units our own management; so I am not sure if that makes a difference or not.
More over from https://www.sapling.com/875009...
Active Participation
In addition to owning at least 10 percent of the rental property to meet the active participation test, you must have actively participated in the property's management, specifically in management decisions. The Internal Revenue Service provides examples of active participation as advertising units, collecting rents and making or arranging for repairs. It clarifies, however, that the term "active participation" is a less stringent standard than "material participation" applicable to real estate professionals. To actively participate you do not have to handle every aspect of management. If you approve new tenants, determine rental terms and approve expenditures, you have met the test.
Even if you actively participate, you are still subject to limitations on taking loss against W2 income if you exceed the $150K household income threshold. There is an important distinction in the quote you included. It would require material participation, which means you need to be a real estate professional. That is a higher standard than actively participating. If you are taking renal loss against W2 income, your CPA is claiming you are a real estate professional. That means you spend over 750 hours a year and over 50% of your time on the rental business. This can be difficult for people to meet, especially if you only own a couple properties or work a full time W2. If you have a full time W2 job, that means you are working 40.1 hours in your rental business each week on top of your 40 hour W2 job. No reasonable person will believe anyone is working that many hours in a rental business, let alone if you only owned a couple properties.
I can't comment on what your CPA is doing, but I assure you that high income earners cannot deduct passive loss, even if you actively participate. Other actively managed businesses may qualify, like a short term rental or maybe your property management company. The standards are different for real estate. By nature of renting real estate, it is considered passive, even when you actively participate. That is in black and white text from the IRS.
You are telling him to fire his CPA, even though his CPA has given him correct advice by tax code. Your situation may be different due to size of your business or your CPA may be pushing boundaries that other CPA are uncomfortable pushing. At the end of the day, the audit and the outcome falls on you, not your CPA, so just be OK with that.
Here is an IRS link that explains it:
Perhaps, however, with 48 units under management, three rehabs in process and under contract for another 12 unit building, it's not hard to get to 750 hours for three people. Additionally, we're an LP taxed as a C-corp, so different rules and it doesn't effect our personal income tax statements.
The 750 hour rule and greater than 50% of time for a real estate professional would apply on an individual basis, not for three people. Since a C-corp is not a pass through entity, there is no tax loss to pass through, so there is no loss to take against W2 income. I am really curious why you are setup as a C-corp. Everything I have read recommends not doing that for real estate due to double taxation. Can you explain the benefit in your situation? Obviously there is some structure that your CPA feels benefits your situation better. Are you taking money out as dividends or return of capital? If you are taking a loss from the C-corp, how does that even work? I thought losses could only be carried forward or back.
No doubt on the 750 hours per person. Again, we're spread all out and with nearly a thousand total tenants, one of us are at a building practically every day; including weekends. There are many benefits as a C-corp; but I am not a CPA, and a CPA can better explain it than I can. Certain deductions and expenses are allowed as a C-corp, whereas an S-corp or disregarded entity doesn't enjoy.
Post: Tax benefits from RE investing in high income earners.
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @Joe Splitrock:
Originally posted by @Mike Adams:
Originally posted by @Greg O'Brien:
@Mike Adams its passive. See IRC 469. The rules are black and white and often “marketed” incorrectly. You can certainly navigate them but there is quite a bit of confusion over the passive activity rules and “working on your rentals.” Simply work on your rentals does not escape 469.
Our CPA firm in White Plains, NY and this is how it has been filed.. active since we manage the property, handle the tenants issues, collect money, do repairs ourself, etc. Again, this is active income, not passive income such as investment income. One would think, a firm with over a dozen CPAs and lawyers would know how to file a tax return for their clients. It would only be passive if a third party management company would be managing the day to day operations. We also have a few dozen units our own management; so I am not sure if that makes a difference or not.
More over from https://www.sapling.com/875009...
Active Participation
In addition to owning at least 10 percent of the rental property to meet the active participation test, you must have actively participated in the property's management, specifically in management decisions. The Internal Revenue Service provides examples of active participation as advertising units, collecting rents and making or arranging for repairs. It clarifies, however, that the term "active participation" is a less stringent standard than "material participation" applicable to real estate professionals. To actively participate you do not have to handle every aspect of management. If you approve new tenants, determine rental terms and approve expenditures, you have met the test.
Even if you actively participate, you are still subject to limitations on taking loss against W2 income if you exceed the $150K household income threshold. There is an important distinction in the quote you included. It would require material participation, which means you need to be a real estate professional. That is a higher standard than actively participating. If you are taking renal loss against W2 income, your CPA is claiming you are a real estate professional. That means you spend over 750 hours a year and over 50% of your time on the rental business. This can be difficult for people to meet, especially if you only own a couple properties or work a full time W2. If you have a full time W2 job, that means you are working 40.1 hours in your rental business each week on top of your 40 hour W2 job. No reasonable person will believe anyone is working that many hours in a rental business, let alone if you only owned a couple properties.
I can't comment on what your CPA is doing, but I assure you that high income earners cannot deduct passive loss, even if you actively participate. Other actively managed businesses may qualify, like a short term rental or maybe your property management company. The standards are different for real estate. By nature of renting real estate, it is considered passive, even when you actively participate. That is in black and white text from the IRS.
You are telling him to fire his CPA, even though his CPA has given him correct advice by tax code. Your situation may be different due to size of your business or your CPA may be pushing boundaries that other CPA are uncomfortable pushing. At the end of the day, the audit and the outcome falls on you, not your CPA, so just be OK with that.
Here is an IRS link that explains it:
Perhaps, however, with 48 units under management, three rehabs in process and under contract for another 12 unit building, it's not hard to get to 750 hours for three people. Additionally, we're an LP taxed as a C-corp, so different rules and it doesn't effect our personal income tax statements.
Post: Tax benefits from RE investing in high income earners.
- Port Chester, NY
- Posts 209
- Votes 156
Originally posted by @Ashish Acharya:
Originally posted by @Mike Adams:
Originally posted by @Greg O'Brien:
@Mike Adams see above. The situation described will not allow him to offset his rental income since his income is >$150k. He special allowance phases out after $150k... The rules for you are most likely different, since you said real estate is your primary business and you meet the qualifications. Most with W2s do not.
"Active Income" for tax purposes can only be achieved if you meet the rules for BOTH as @Ashish Acharya described.
Simply managing your rental does not lead to material participation. Second, since he stated he was a W-2 income from an unrelated business, the bar is extremely high to pass as a REP. You need both. To date, there is only one known Tax Court Case where a W-2 professional was able to be a REP with material participation while working a full time job...and he was a tug boat captain who worked a few days per week.
That being said, there are other methods out there that he could deploy, but managing the rentals with a full time job is not going to solve the problem
I think the issue is that our partnership is treated as a C-corp, so that may be the difference. I am not a CPA, so we leave it up to the firm to file everything correctly. We also have a separate entity that we own which manages our property management services for our own buildings.
Do you want any of us to review your tax return because I have a feeling it’s not reported correctly?
Thank you, but we're good. I do not think anything was reported incorrectly. I've already brought this thread up to our CPA firm and I was told everything was filed according to code for the states and the feds.